Audi CEO Rupert Stadler, shown here with the etron concept, reportedly wants the new plant in Mexico.
The long-delayed decision on whether to build an Audi plant on this side of the Atlantic could be resolved as early as tomorrow, insiders suggesting that parent Volkswagen Group will formally give its approval on Wednesday.
But other reports caution that the new factory is more likely to go into Mexico than the U.S. Mexico has become a hot spot for global automotive manufacturers looking to take advantage of its central location, low manufacturing costs – and the extensive array of automotive free trade agreements Mexico has lined up with countries around the world.
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The parent VW Group is apparently supporting the idea of building the new plant in the States, according to Germany’s Automobilewoche magazine. But Audi CEO Rupert Stadler has been lobbying for a site in Mexico.
VW recently opened a new factory in Chattanooga, Tennessee and has seen a sharp surge in demand for the Passat model produced there. That has led to a rapid expansion of capacity in Chattanooga. VW may prefer to take advantage of the supply and distribution network set up to support that factory. And it might see an advantage to placing a plant in the U.S. as a way to help spur demand in one of its weaker markets.
While Audi has been setting sales records in the United States, it still lags sharply behind key competitors BMW, Mercedes-Benz and Lexus, even though the VW brand is now one of the top sellers in the global luxury market.
The “Made in USA” label could prove important in boosting sales, Michael Macht, the VW Group’s manufacturing chief, told Automotive News earlier this year.
But there are plenty of reasons why Audi CEO Stadler appears to be favoring Mexico, sources stress. Indeed, VW has long favored the Spanish-speaking nation where it has been building such models as the Beetle.
The typical Mexican automotive assembly plant’s total labor costs run about $8 an hour, according to industry data. Quality has proven extremely high. There is an extensive supplier network and reasonably good distribution system for completed vehicles.
Among other things, Audi might be able to directly tap a new powertrain plant in Silao, Mexico, which will launch production next year and offer capacity of up to 300,000 engines annually.
Meanwhile, Mexico has signed more automotive free trade agreements than any other country except Israel, meaning minimal duties on products exported from the country. That could be seen as particularly useful to supply Audi’s growing sales in not only the U.S. but emerging markets, like Brazil, Chile and Argentina, in South America.
Audi isn’t the only high-line maker weighing its Mexican options. Mercedes-Benz recently announced that it will build a second North American plant to supplement the existing facility in Alabama. While officials only say they are considering several options, insiders have told TheDetroitBureau.com that the German maker is leaning heavily towards a site in Aguas Calientes.
That would put it adjacent to, and perhaps even on the actual campus of, a new Nissan plant announced earlier this year. Mercedes’ parent, Daimler AG, has been rapidly expanding its partnership with the Euro-Asian Renault-Nissan Alliance. Among other things, that includes providing the MFA small car platform that will be used for a production version of the Infiniti Etherea concept vehicle.
The Daimler plant, if it goes to Aguas Calientes, may produce vehicles for both Mercedes and Nissan.
As for Volkswagen, both the Chattanooga plant and the Audi facility would become critical pieces in the maker’s plan to achieve global dominance by 2018, when its various brands aim to collectively sell at least 10 million vehicles annually.